Whats "backing" bitcoin?

[andrewboy44]

I get this question almost everyday... But in reality, what is backing the US dollar? Whats backing Gold? Whats backing Silver?? Everything I listed is backed by the people... Nobody would invest in Gold if it didn't have value, nobody would buy diamonds if they didn't have value, nobody would buy silver coins if they didnt have value. We give everything value. As long as the people continue to believe in BTC (why would you not?! ) it will remain a booming currency. I would like to see btc level out at a price b/c this would allow people to have more trust in the currency when putting money into it. But I have a few questions. What do you think about btc future? What would be an ideal level price for btc? And is anything really backing USD, Gold, Silver? or is it just the believe that we instill in it?

[eternaluniverse]

Peter schifer says that there's intrinsic value in gold, on some levels hes right. But, if the demand of gold-buyers shot down, it would be then worth pennies. So in a sense peter schifer is saying that if bitcoin dies will have nothing, if gold crashes investors will have pennies, and for some reason that makes it better?

I would rather give up the extra pennies in the event that either market vanishes. But I also wouldn't recommend spending more than 10-20% of your total investment fund on bitcoins, but I believe it will make a return far greater than the rest of your portfolio combined.

BTC won't level im predicting for at least the next 5 years, there will be huge gains, but also a few crashes as well (which will cause some people to lose their money because they won't hold out till it rises again)

[hilariousandco]

"Whats "backing" bitcoin?" We, the people who use and accept it.

[BittBurger]

Utility is backing bitcoin.

Usefulness.

It does things that Gold could never do.

It does things that US Dollar could never do.

Bitcoins ability to send money, anywhere in the world, free of charge, and almost instantly, makes it a savings of literally Trillions of dollars to the consumers of the world.

Thats Trillions of dollars of intrinsic value right there.

Add to that the elimination of 3-5% (to sometimes up to 10% if its an international rewards card) merchant fees that merchants pay, and Bitcoin is backed by Trillions more of savings to Merchants.

Amazon.com would save hundreds of thousands of dollars in merchant fees every month just by switching to Bitcoin.

-----------------

Bitcoin is something new.  It isn't "backed" by traditional things (useless things like "Its pretty" or "Govt can print more").

That is only 2 things Bitcoin can do.   And it can do more ....

Bitcoin is backed by its capabilities.  it does something nothing else has been capable of doing before.

At least this is the answer I give people.

[superresistant]

This question has been around for years.

Nothing is backed.

The world only exist because you observe it. Everything is an illusion.

[Sindelar1938]

Mathematics and best in breed cryptography

[andrewboy44]

"Whats "backing" bitcoin?" We, the people who use and accept it.

Exactly! So theoretically speaking we the people that use and accept USD, Gold, silver are the ones backing it.. I try to argue this to people and they just get defensive and try to say how bitcoin is stupid, etc...

[andrewboy44]

This question has been around for years.

Nothing is backed.

The world only exist because you observe it. Everything is an illusion.

+1. I'm glad the btc community isn't stupid.. its seems like we are the outsiders at the moment but just give it a year

[Lewis2]

It is backed by demand. Currently there is demand because of increasing value, a self forfilling prophesy. Bitcoin is almost as useless in gold at the moment, can't go to the store with it. Big difference is you can make a band of gold and impress a girl with it.

It is all one big nothing, as is the dollar if we all decide at the same moment it is worthless.

[superresistant]

This question has been around for years.

Nothing is backed.

The world only exist because you observe it. Everything is an illusion.

+1. I'm glad the btc community isn't stupid.. its seems like we are the outsiders at the moment but just give it a year

People take the material world too seriously and try to explain it with rules and laws.
All rules and laws come to an end.
Dollar is coming to its end.
The world as we know is changing to fast for people to understand it and make good decisions.

[Ravocado]

People's trust is backing it...people believe in it and trust in it.

[hilariousandco]

"Whats "backing" bitcoin?" We, the people who use and accept it.

Exactly! So theoretically speaking we the people that use and accept USD, Gold, silver are the ones backing it.. I try to argue this to people and they just get defensive and try to say how bitcoin is stupid, etc...

Just tell them that any currency or commodity is only worth what somebody is prepared to pay for it. I find all currencies bizarre ultimately. Fiat currency is just a bit of worthless metal or paper with the Queen's head on it. If people stopped dealing with it and stopped accepting it and switched to digital currency, its value would plummet or become worthless unless there was people willing to accept it as a payment medium. Bitcoin is the opposite of this. It's in demand, people want it, people will accept it for goods; therefore it is worth something and it's value is sky-rocketing because of this.

Why are paintings worth anything? They are just colour on a canvas, but I can't say a Jackson Pollock painting is a worthless piece of shit because there's people out there that will happily pay millions for one. If people are prepared to pay millions, it is worth millions. This logic is applied to anything, including cryptocurrencies. Why is the original Mona Lisa "priceless", yet you can buy a forgery painted by a master of his craft which would fool most experts for mere thousands? 'Worth' of money is ultimately an illusion, but we put our faith in it. I can pay with high quality fake money and people would accept it even though it's just a bit of fancy paper. They can spot it as a fake and refuse it, then it is worthless, but if they don't spot it and accept it; it's worth something.

[AnonyMint]

I will condense my November archives.

I can invest $10 billion of gold without converting it to fiat (I retain it in my London approved vault), by contractual leasing as Martin Armstrong taught the Arabs to do, since they are prevented from loaning with usury by Islam. This adds liquidity for the futures markets in gold.

I can't invest $10 billion in Bitcoin without converting it to fiat.

Bitcoin has no intrinsic value without fiat. I can't invest it in a business, because my employees can't use it to buy all the things they need. And purchasing with Bitcoin is very slow and sometimes fails to get in the block chain and much confusion and hassle. Someone down the line always converts it to fiat, even if it is the merchant, yet most often it is the Bitcoin investor who converts it to fiat when cashing out.

In order for that to change, there needs to be 97% of the people using Bitcoin to transact. There is no possible way to get from here to there for as long as Bitcoin is dominated by people buying for gains not for spending. The vast majority are not buying Bitcoin for spending.

The masses will buy Bitcoin only if they think they will have gains too. Once they think they can't get gains, they won't buy (who buys a crazy volatile thing for spending?!! Nobody). Then there are no more gains because not enough new fools buying in. So then, those who bought for gains, leave to altcoin or something that has gains. Stampede. Ponzi collapse. End of story. Wasteland.

Also the altcoins are beginning to dilute Bitcoin's rarity. Litecoin was at $36 and $1.2 billion market cap. And this competition will increase, now that the pie has become large and attractive.

[wannasurf]

I have a different answer than the ones I read so far in this thread.

My answer is that the mining pool backs bitcoin. Building up a crypto-currency is a chicken-and-egg problem: how to build up a computational network that can secure my transaction for all time to come, allow me to transfer my family's wealth to this thing and absolutely know that it won't be invalidated. The mining pool is the chicken, and then now the faith of all these users in the mining pool to deposit funds is the egg. Then the egg feeds back to make more chickens.

Since mining seems to be (like farming in the 1980's) a zero-profit industry over time, we will see approx $1B spent on building the network to verify transactions over just this next year.

If you heard of a startup that was well-funded to the tune of $1B going to invest in building out the world's most rigorous financial transaction system, would you think it was worth a $12B market cap? Hell yeah, it's not even up for question.

I think that safely gets you out of "tulip" arguments.

[Mike Christ]

All money is backed by its users.  This is why gold is forever viewed as the de facto money: you see gold in video games, novels, movies and so forth, always as the ultimate representation of wealth.  Gold is known universally as the money; if people didn't believe this was true, then it ceases to hold this title.

Bitcoin, ultimately, is backed by its users.  By holding and proselytizing it, I have acknowledged that bitcoin is valuable.  As more people agree, the value of bitcoin increases.  Because money only represents the energy of man, there is in no scenario where money can be valuable without a belief that it is so; we seek a money that will best represent our efforts, and both gold and bitcoin hold these special properties.  Nothing more backs these monies, and nothing less.  Bitcoin is backed by you and I.

[solex]

Bitcoin is backed by its blockchain which is backed by the enormous computing power of the miners.

[Peter Todd]

The Power of Love

[XBBlade]

Innovation power, 'new', business accepting it and people who use it.

[Light]

In my opinion, there really isn't anything that per we "backs" Bitcoin, only the opinion of its users that it has some value and hence they are willing to accept it as a form of payment. The reality is that nothing is really "backed", instead all conventional forms of wealth are based on a common agreement and perception of value.

[AnonyMint]

In my opinion, there really isn't anything that per we "backs" Bitcoin, only the opinion of its users that it has some value and hence they are willing to accept it as a form of payment. The reality is that nothing is really "backed", instead all conventional forms of wealth are based on a common agreement and perception of value.

Agreed. But note that fiat is backed by the fact that everyone is using it as a currency. We discussed the notion in another thread, that when fiat dies, society does (temporarily, but 57 million gunned in the back of the head in China during the Cultural Revolution is sort of dead I think...ok that example wasn't purely from hyperinflationary failure but it was a factor as usual*). That is a very strong incentive to keep the confidence intact. Bitcoin doesn't have that.

That perceived ethical and efficiency value is largely based on the belief that Bitcoin will improve upon things we all detest. Yet as my analysis has dug in deep on Bitcoin, it doesn't appear to hold up technically. So when that becomes more widely understood, the bubble might be pricked.

Any way, I am about done with trying to spread that message with words. Very inefficient. There are more efficient ways for me to proceed which don't put me into a fight in a forum with every Bitcoin believer. I just wanted to lay out the concepts for posterity, for other writers to use, and to open the door for the most adept to consider improved altcoins.

*It is the fall into insane governance such as communism and totalitarianism that drives the hyperinflation. The point remains, we hang on to the fiat for as long as we can, because losing it coincides with a horrific end. Society hasn't yet found and implemented an alternative solution. Or maybe we have with Bitcoin, except my study of it is that it won't perform as we hope.